Three Ratios After A Bad Day

Some Longer Term Perspective!

Chris Vig
September 14, 2022

Yesterday was brutal for the SP500 and related markets. After such a steep one-day decline we find it helpful to look at a few of our ratios on a longer-term basis.

Here are three weekly charts for the past 15 years. Nothing magical, just some perspective:

FDN vs TLT. Internet "Growth" vs 20-year Treasuries "Safe". You can see we remain in a longer-term uptrend. With interest rates rising this could be a little misleading, but the trend has not been broken to the downside.

XLY vs XLP. Consumer Discretionary "Risk-On" vs Consumer Staples "Risk-Off". This one surprised me a bit. We are off the lows, above the 25-week moving average, and above the trend line.

QQQ vs SPY. Another measure of risk-taking in the markets. You can see this is near the support line. This looks the most vulnerable. If it crosses to the downside it could mean a much greater drop in equity markets. Still, at this point, it is above the long-term trend line.

None of these predict anything. And these are much longer term than the ratios we use for the V2 model. We do, however, find it useful to think about the big picture after a one of the worst market days in a couple years. We were fortunate - with our V2 allocation to risk-off - that we missed the steep decline yesterday.

Plan

Our plan? Market trends may change and they may change rapidly. We will stay nimble and be vigilant to changes in either direction. We will follow the math.

Distance=Victory

Chris

The Vig Co. DOES NOT provide financial advice. All content is for informational purposes only. The Vig Co. is not a registered investment, legal, tax advisor, or broker/dealer. We are simply sharing the detail of our V2 Model. The decisions you make for your investments are your own. Trading any asset can be risky and can result in significant capital losses. Terms Of Service.